Is COBRA dead? An employee’s view of COBRA cost

This is the first in a 3-part series entitled “Is COBRA dead?

Before Obamacare, COBRA was the definitive short-term safety net for health insurance. If you lost your job, the fastest way to get insured without seeing a gap in coverage was to sign up.

But COBRA has always been expensive. Choosing COBRA means you must pay the full premium cost, including the employer contribution portion. Still, this was once the weapon of last resort for many laid-off workers, and since it did not require medical underwriting, it was the only choice for people with pre-existing conditions. As recently as 2009, more than 2M people per year (PDF) have used COBRA to access health coverage while in between jobs.

Now, with the passage of ACA and the growing viability the exchanges, employees have a new alternative to COBRA that from the outside appears superior in every way. Like COBRA, the exchanges are “guaranteed issue.” But more importantly, they’re a whole lot cheaper.

COBRA cost comparison: the employee perspective
The charts below compare the average cost of a COBRA plan with a comparable insurance policy on the exchange. Over the course of 10 months (the average length of time someone stays on COBRA), this adds up to real money. By avoiding COBRA and electing an exchange plan instead, an individual can save $3-4k, and a family can save $12-14k.



Employees electing to stick with COBRA must pay the full “group” insurance rate, which we have shown already to be more expensive than your typical exchange policy. In addition, COBRA users cannot access the premium tax credits that are available on the exchange, which they would likely be eligible for if they recently lost their job.

Will employers respond?
A 2013 survey by the National Business Group on Health revealed that 41% of employers expect their employees to forgo COBRA, and instead opt for exchange coverage. The math clearly works out. But are employers doing anything about it?

In our next entry, we’ll explore how employers may be luring their employees down a dangerous COBRA “trap” without even realizing it.

Benefitter helps your company successfully make a transition to the individual market for health coverage and reduce your company’s health expenses by up to half, while giving your employees a comparable deal and more choices. If the individual market opportunity sounds interesting to you, check out the Benefitter story at